PROJECT REPORT

ON

SEGMENTATION OF INDIAN CONSUMER

To be submitted by
GAURAV GARG
DEEPAK ASNORA

Project given by

Prof.Alok anand

NIIM - School of Business Administration

B-II/61, Sher Shah Suri Marg, MCIE, Mathura Road, Badarpur, New Delhi
Content
1.Introduction………………………………………………………………………………. 3

2. Segmentation…………………………………………………………………………… 4

3. Logic of segmentation…………………………………………………………………. 4

4. Criteria of segmentation………………………………………………………………. 4

5. Indian consumer……………………………………………………………………….. 5

6. Economic growth and rising disposable income of Indian consumer……………. 5

7. Bases for segmentation……………………………………………………………….. 7

I. geographic Segmentation……………………………………………………. 7

II. Demographic Segmentation………………………………………………… 7

III. Psychographic Segmentation………………………………………………. 11

IV. Behaviouralistic Segmentation…………………………………………….. 12

8. Recommendation……………………………………………………………………… 13

9. Conclusion……………………………………………………………………………… 14

10. Bibliography…………………………………………………………………………… 15
 INTRODUCTION

India has the youngest population profile among the numerically significant countries-there are a
lot of young people, in different income segment and location, who are influencing their parents
spending or spending their own money. Indian consumer market has never had its better.
Higher disposable incomes, the development of modern urban life style and increase in
consumer awareness have effected by behavior in cities, towns and even rural areas. According
to a 2007 report by Mckinsey & co., India is set to grow into the fifth largest consumer market in
the world by 2025.

Buying power has also expended to new consumer segments be it the youth or the urban
woman. Urban Consumer Groups have been created using methods similar to methods used
internationally, but India focused accounting for the differences both in terms of the
characteristics of the Indian consumers and the availability of large scale household level raw
data sets.

Indicus Consumer Spectrum has been designed to help marketers understand the essence of
33 Consumer Segments, which together represent the entire urban spectrum of India. It
highlights the key features which make each segment distinctive. The purpose of this work is to
help marketers devise advertising and communications strategies and fine tune their sales
strategies, targeting and execution.

The segments have been derived based on two key dimensions - lifestyle stages of chief wage
earners of households and their skill levels. The first defines their needs and the second defines
their earning abilities.

Modern marketing techniques in industrialized countries cannot be implemented without

segmentation of the potential market. Goods are no longer produced and sold without a
significant consideration of customer needs combined with recognition that these needs are
heterogeneous. Since first emerging in the late 1950s, the concept of segmentation has been
one of the most researched topics in the marketing literature. Segmentation has become a
central topic to both the theory and practice of marketing, particularly in the recent development
of finite mixture models to better identify market segments.
SEGMENTATION
Market segmentation can be defined as the process of dividing a market into distinct subsets of
consumers with common needs or characteristics and selecting one or more segments to target
with a distinct marketing mix.
The importance of market segmentation results from the fact that the buyers of a product or a
service are no homogenous group. Actually, every buyer has individual needs, preferences,
resources and behaviors. Since it is virtually impossible to cater for every customer’s individual
characteristics, marketers group customers to market segments by variables they have in
common. These common characteristics allow developing a standardized marketing mix for all
customers in this segment.

THE LOGIC OF SEGMENTATION

Segmentation seeks to isolate significant differences among groups of individuals in the market,
it can aid marketing decision making in at least four ways :

(1) Segmentation helps the marketer by identifying groups of customers to whom he could
more effectively ‘target’ marketing efforts for the product or services.
(2) Segmentation helps the marketer avoid ‘trial and error’ method of strategy formulation by
providing an understanding of these customers upon which he can tailor the strategy.
(3) In helping the marketer to address and satisfy customer needs more effectively,
segmentation aids in the implementation of the marketing concept.
(4) On going customer analysis and market segmentation provides important data on which
long-range planning can be based.

Criteria for segmentation

If segmentation has to be useful in marketing decision making, then it must possess the
following characteristics:

(1) Segmentation must be internally homogeneous - consumers with in the segment will
be more similar to each other in characteristics and behavior than they are to consumers
in other segment.
(2) Segments must be identifiable – individuals can be ‘placed’ within or outside each
segment based on a measurable and meaningful factor.
(3) Segment must be accessible – can be reached by advertising media as well as
distribution channels. Only then, the segments can be acted upon.
(4) Segment must have an effective demand – the segment consist of a large groups of
consumers and they have the necessary disposable income and ability to purchase the
good or service.
Indian Consumer

India has the youngest population profile among the numerically significant countries-there are a
lot of young people, in different income segment and location, who are influencing their parents
spending or spending their own money. Indian consumer market has never had its better.
Higher disposable incomes, the development of modern urban life style and increase in
consumer awareness have effected by behavior in cities, towns and even rural areas. According
to a 2007 report by Mckinsey & co., India is set to grow into the fifth largest consumer market in
the world by 2025.

India’s consumer market till now was broadly defined as a pyramid; a very small affluent class
with an appetite for luxury and high-end goods and services at the top, a middles-class at the
center and a huge economically disadvantaged class at the bottom. This pyramid structure of
the Indian market is slowly collapsing and being replaced by a diamond – a relatively large
affluent class at the top, a huge middle class at the center and a small economically
disadvantaged class at the lower end. The diamond represents increasing volume and value
across all classes of Indian consumer market

Economic growth and rising disposable incomes of

Indian consumer
India is growing at an average annual rate of 7.6% for the past five years and it is expected to
continue growing at an equal if not faster rate. The rapid economic growth is increasing and
enhancing employment and business opportunities and in turn increasing disposable incomes.
As the benefits of growth trickle down, an increasing number of people are moving up from the
economically weaker class to join the middle class.
The middle class with its rising numbers and incomes is thus becoming the biggest market
segment. The affluent class too will continue to grow in terms of size and value, albeit, at a
slower pace than the middle class.

MGI study prediction on the effect of economic growth on different classes

(1) Middle class, defined as households with disposable incomes from Rs 200,000 to
1,000,000 a year comprises about 50 million people, roughly 5% of the population at
present. By 2025 the size of middle class will increase to about 583 million people, or
41% of the population.

Extreme rural poverty has declined from 94% in 1985 to 61% in 2005 and is projected
to drop to 26% by 2025.
 (2) Affluent class, defined as earning above Rs 1,000,000 a year will increase from 0.2% of
the population at present to 2% of the population by 2025. Affluent class’s share of
national private consumption will increase from 7% at present to 20% in 2025.
Pro-growth demographics of Indian consumer
The widespread adoption of improved medical care and birth control since the 1970s has
reduced birth rates and increased the proportion of citizens living past their retirement age in
most countries. As these countries have an aging population, they are beginning to face an
acute shortage of working age population, while the proportion of dependent population is
increasing.

India along with a few other countries is an exception to this. In India, the proportion of citizens
of working age is forecast to fall slowly and the overall labor force will continue to grow. India
has a young population, 54% of Indians are under 25 years of age. A rising productive
population fuels growth and drives personal consumption and a lower age dependency ratio
places less strain on public finances. A young, economically empowered population not only
translates into increasing consumer demand but also into a more value-conscious demand.
Thus, pro-growth demographics will expand consumer market in India. The National Council of
Applied Economic Research (NCAER), forecasts that the number of consumers driving growth
Will grow from 46 million households in 2003 to 124 million households in 2012.

Characteristics Of The Indian Consumer Behavior

The Indian consumers are noted for the high degree of value orientation. Such
orientation to value has labeled Indians as one of the most discerning consumers in
the world. Even, luxury brands have to design a unique pricing strategy in order to
get a foothold in the Indian market.
Indian consumers have a high degree of family orientation. This orientation in fact,
extends to the extended family and friends as well. Brands with identities that
support family values tend to be popular and accepted easily in the Indian market.
Indian consumers are also associated with values of
nurturing, care and
affection. These values are far more dominant that values of ambition and
achievement. Product which communicate feelings and emotions gel with the Indian
consumers. Apart from psychology and economics, the role of history and tradition
in shaping the Indian consumer behavior is quite unique. Perhaps, only in India, one
sees traditional products along side modern products. For example, hair oils and
tooth powder existing with shampoos and toothpaste.

BASES FOR SEGMENTATION

Markets can be segmented using several relevant bases. There are huge number of variables
which leads to market segmentation. They comprise easy to determine demographic factors as
well as variables on user behavior or customer preferences. Segmentation is done for consumer
market.

Bases for segmentation in consumer market:-
Consumer market can be segmented on the following customer characteristics
1. Geographic Segmentation.
2. Demographic Segmentation.
3. Psychographic Segmentation.
4. Behaviouralistic Segmentation.

1) Geographic Segmentation: -

Potential customers are in a local, state, regional or national marketplace segment. If a firm
selling a product such as farm equipment, geographic location will remain a major factor in
Segmenting your target markets since their customers are located in particular rural areas.
While for retail store, geographic location of the store is one of the most important
considerations, in this case city areas are preferred. Segmentation of customers based on
geographic factors are:-

a. Region: - Segmentation by continent / country / state / district / city.

b. Size: - Segmentation on the basis of size of a metropolitan area as per its population
size.
c. Population density: - Segmentation on the basis of population density such as
urban / sub-urban / rural etc.
d. Climate: - Segmentation as per climatic condition or weather.

2) Demographic Segmentation: -
Segmentation of customers based on Demographic factors are:-

a.Age (dominant factor):-Segmentation is done on the basis of age of

person. Example Titan has segmented its product according to differentage group of person.

Titan’s product segmentation on the bases of age:-

Titan created a sub brand, Fastrack. These watches are specifically for young, vibrant, and cool
outgoing young generation. While for older person and professional it has created the steel
series watches and also the famous, Sonata.
 ) Titan Fastrack ( for the younger segment

Steel-1077SM01 (for elder person and professional)

a. Income (dominant factor):-Segmentation is done on the basis of

income level of a person. Example of Titan watches can be citied such as Titan offered Aurum
and Royale in the gold/jewellery watch range with price ranges between Rs. 20000 to Rs.1
lakh.

Titan Nebula (Luxury segment watch)

For middle segment, Titan offered Exacta range in stainless steel, aimed at
withstanding the rigours of daily life. There were 100 models in the range. Price ranges within
Rs500-700.

For the third segment, Titan offered the Sonata range. The price range was
between Rs.350 to 500.

Titan Sonata (Watch for the third segment)

b. Purchasing power (dominant factor):- Segmentation
done on
the basis of purchasing power of the customer. Examples of different car segment based on
purchasing power are :-

Budget car segment-

It is the largest segment in Indian market. Here the entry level starts from Rs 1.5 to 3 lakh.
Maruti 800 and Omni are the dominant players in these segments. With the launch of Tata
Nano with a price range of 1lakh the outlook of this segment has changed. This segment is
sometimes referred to as the small car segment. Competition in this segment is extreme in
Indian market.

Maruti 800 (Budget Car Segment)

Compact car segment –

It lies between budget car and family car. Preferred price range is between Rs 3 to 4.5 lakh.
Maruti Zen, Fiat Uno, Tata Indica, Santro , Matiz is some of the dominant players in this
segment.
 Maruti Zen (Compact car segment)

Daewoo Matiz (Compact car segment)

Cars of compact segment

Family car segment-
The purchasing capacity of buyers of this segment is somewhat higher than that of the budget
and compact car segment. Price ranges between Rs 4.5 to 6 lakhs. Maruti Esteem, Daewoo
Cielo, and HM Contessa belongs to this segment. In India cars that are sold in India as
‘Budget Car’ and ‘Compact Car’ do not meet their purpose, especially in term of space, that they
turn to ‘the family car segment’.

Daewoo Cielo (Family Car segment)

Premium car segment-

This segment represents the buyer who require true world class luxury car. Price ranges
between Rs 6 to 8 lakh. Ford Escort, Honda City, Honda City, Mitsubishi Lancer, Audi
1800, Opel Astra etc are some of the major cars in this segment.

Opel Astra (Premium car segment)

Super luxury saloon segment-

Buyer in this segment looks for a real super premium segment car. Mercedes Benz E229, E-
250, Rover Montego, Audi 6, BMW are the players in this segment. Obviously, this is a tiny
segment in the Indian context.

Audi 6 (Super Luxury

saloon)
c. Occupation.
d. Gender (dominant factor):-Product can be segmented for male
and female.
e. Family Size.
f. Family life cycle.
g. Nationality.
h. Religion.
i. Education:-Primary, High School, Secondary, College, Universities. Many of these
variables have standard categories for their values. For example family lifecycle often is
expressed as bachelor, married with no children, full-nest, and empty-nest or solitary survivor.

3) Psychographic Segmentation : - Psychographic

Segmentation groups
customers according to their life-style and buying psychology. Many businesses offer products
based on the attitudes, beliefs and emotions of their target market. The desire for status,
enhanced appearance and more money are examples of psychographic variables. They are the
factors that influence your customers' purchasing decision. A seller of luxury items would appeal
to an individual's desire for status symbols Psychographic Segmentation includes variables
such as:-
a. Activities.
b. Interests.
c. Opinions.
d. Attitudes.
e. Values.
Activities, Interests, and Opinions (AIO) surveys are one tool of
measuring lifestyle.

4) Behaviouralistic Segmentation: - Markets can be segmented

on the
basis of buyer behaviour as well. Since all Segmentation is in a way related to buyer behavior,
one might be tempted to ask why buyer behavior-based segmentation should be a separate
method. It is because there is some distinction between buyer’s characteristics that are reflected
by their geographic, demographic and psychographic profiles, and their buying behaviour.
Marketers often find practical benefit in using buying behaviour as a separate segmentation
base in addition to bases like geographic,demographics, and psychographics. The primary idea
in buyer behaviour segmentation is that different customer groups expect different benefits from
the same product and accordingly, they will be different in their motives in owing it and their
behavior in buying it. Variables of buyer behavior are:-

a. Benefit sought: - Quality / economy / service / look etc of theproduct.

b. Usage rate: - Heavy user / moderate user / light user of a product.
c. User status: - Regular / potential / first time user / irregular occasional.
d. Brand Loyalty: - Hard core loyal / split loyal / shifting / switches.
e. Readiness to buy.
f. Occasion: - Holidays and occasion stimulate customer to purchase products.
g. Attitude toward offering: - Enthusiastic / positive attitude / negative
attitude / indifferent / hostile.
Recommendations

1. In present scenarios youth will be the best medium of segmentation in India

because Indian is youngest country in the world. In India youth will be the
targeted market of any company.
2. Kids also may be the segmented target in India. In India kids influence their
parents behavior for purchasing any product. So if we targeted kids it will be
use full for company and organization.
3. India 2nd largest growing country after the china in the world. In India rural
population is now aware for most of the product. So rural population also may
be the target area of any organization.
4. working women also may be the target area of any company because she are
totally aware about the product and they doing all her work herself.
5. Best way of segmentation in India is income bases. There are live different
types of people and their income is different. we divided these people in
three groups.
I higher income group
II medium income group
III low income group
So we can target these people from different way.
Conclusion

India is growing at an average annual rate of 7.6% for the past five years and it is expected to
Continue growing at an equal if not faster rate. The rapid economic growth is increasing and
enhancing employment and business opportunities and in turn increasing disposable incomes.
As the benefits of growth trickle down, an increasing number of people are moving up from the
economically weaker class to join the middle class.
The middle class with its rising numbers and incomes is thus becoming the biggest market
segment. The affluent class too will continue to grow in terms of size and value, albeit, at a
slower pace than the middle class.

The primary idea in buyer behaviour segmentation is that different customer groups expect
different benefits from the same product and accordingly, they will be different in their motives in
owing it and their
behavior in buying it.
Bibliography

(1) www.google.com
(2) www.yahoosearch.com
(3) www.scribd.com
(4) www.quickmba.com
(5) www.projectparadise.com
(6) www.managementparadise.com
(7) www.marketingteacher.com
(8) www.surfindia.com
(9) Consumer behaviour book of pondicherry university
(10) Consumer behaviour by Blackwell and engel
(11) Kotler 13th edition
(12) Marketing management by meenaxi and arun kumar